It has been a tough market. The uncertainty surrounding the war with Iran is taking a toll. But one stock in particular should be worth enduring possible short-term downside for potentially sizable returns over time. It’s AbbVie Inc. (ABBV), says Tom Hutchinson, editor of Cabot Income Advisor.
The selling is bad, but not that bad. It’s nothing like the tariff hysteria last April when the S&P fell nearly 20%. Of course, the selling might not be over. But in any event, this is when income investments shine.
AbbVie Inc. (ABBV)
The S&P 500 Index (^SPX) recently closed at the same level as it was at the end of last August. But dividend stocks still kept paying. And if you also sold covered calls, you got an even better return while the market did nothing.
This “what to do now” thing is tough. The market is being driven by events in the Middle East, which are highly unpredictable. Buying stocks now seems like a bit of a gamble, unless you’re in for the long term. But ABBV has been a stock with strong returns in the past that should be even better going forward.
The loss of a patent on its autoimmune drug Humira has held the stock back. But its newer replacement drugs are now generating more revenue together than Humira ever did. The price usually has a big spurt higher once or twice a year and then consolidates.
While it’s been pulled down by the Iran news, there are good reasons to believe ABBV has strong upside between now and the end of the year, as it has entered a new era of profitability. It’s also a health care stock. It doesn’t really matter what happens with the war or oil prices. People will still buy medicine.
